Handsets: while assembly soars, local value-addition poor
Handset components may need more R&D and IPR, and a better legal framework, to take off
India has become a hub for handset assembly. Industry body Indian Cellular Association (ICA) says handset manufacturing in 2015-16 rose to Rs.540 billion from Rs.190 billion a year earlier.
ICA estimates the same activity to reach Rs.940 billion this fiscal. Some 25 firms are setting up phone assembly lines employing over 37,000 people. Factories are coming up across 35 locations in 10 States, and will have capacity to produce 20 million handsets a month, according to ICA data. Even Chinese players like Vivo and Xiaomi are going into local assembly. Micromax, Lava and Intex are sourcing most models from their local factories.
Of the estimated 220 million handsets sold in India in 2015-16, 110 million had some form of local manufacture
But since most phone components are not made in India, local value-addition for most firms ranges between 2 and 8 per cent of phone value.
The industry hopes that over the next few years things will change. "Printed circuit board assembly, the most important part of a device, is imported from China. We will soon manufacture 70 per cent of such parts in India" Amitabh Khurana, Head, Manufacturing, Intex, told Business Line.
Hurdles to take off in components include insufficient infrastructure and logistics facilities, tough labour laws, taxes and import duty structures, capital costs, land acquisition and lack of skilled labour.
Industry experts say that assembly today makes sense since the duty structure has made it significantly cheaper to import components. To climb the value added ladder "the Centre has to undertake reforms to incentivise R&D and IPRs," says TV Ramachandran, former head of the Cellular Operators Association
Besides needing more R&D and IPRs, handset components require a better legal framework, to take off. Can India oblige?
Based on story in Hindu Business Line
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